Publication: The Place Premium : Wage Differences for Identical Workers across the US Border
Loading...
Date
2008-07
ISSN
Published
2008-07
Editor(s)
Abstract
This paper compares the wages of workers inside the United States to the wages of observably identical workers outside the United States-controlling for country of birth, country of education, years of education, work experience, sex, and rural-urban residence. This is made possible by new and uniquely rich microdata on the wages of over two million individual formal-sector wage-earners in 43 countries. The paper then uses five independent methods to correct these estimates for unobserved differences and introduces a selection model to estimate how migrants' wage gains depend on their position in the distribution of unobserved wage determinants. Following all adjustments for selectivity and compensating differentials, the authors estimate that the wages of a Bolivian worker of equal intrinsic productivity, willing to move, would be higher by a factor of 2.7 solely by working in the United States. While this is the median, this ratio is as high as 8.4 (for Nigeria). The paper documents that (1) for many countries, the wage gaps caused by barriers to movement across international borders are among the largest known forms of wage discrimination; (2) these gaps represent one of the largest remaining price distortions in any global market; and (3) these gaps imply that simply allowing labor mobility can reduce a given household's poverty to a much greater degree than most known in situ antipoverty interventions.
Link to Data Set
Citation
“Clemens, Michael A.; Montenegro, Claudio E.; Pritchett, Lant. 2008. The Place Premium : Wage Differences for Identical Workers across the US Border. Policy Research Working Paper No. 4671. © World Bank. http://hdl.handle.net/10986/6828 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Geopolitical Fragmentation and Friendshoring(Washington, DC: World Bank, 2025-06-26)This paper examines the relationship between geopolitical fragmentation and friendshoring of foreign investments over time, countries, and sectors. The analysis uses comprehensive data on foreign direct investments covering greenfield projects, mergers and acquisitions, and stocks of affiliates, as well as data on four alternative measures of geopolitical distance between countries. The gravity estimations suggest that, first, geopolitical differences have a negative effect on foreign investments and the magnitude has heightened in the post-pandemic period compared to a decade ago. Second, it is primarily the companies from advanced Western economies whose foreign investment decisions are increasingly shaped by friendshoring forces. Finally, the paper shows that friendshoring is not only confined to strategic industries, implying that allocations of foreign direct investments may not solely reflect national security or resilience considerations.Publication Soaring Food Prices Threaten Recent Economic Gains in the EU(Washington, DC: World Bank, 2025-07-02)The surge in food prices following the 2021 economic rebound has become a significant concern for households, particularly low-income ones, in Bulgaria, Croatia, Poland, and Romania. Food price inflation, which surpasses general inflation rates, risks worsening poverty and food insecurity in these countries. This paper explores the distributional impacts of rising food prices and the effectiveness of government response measures. Low-income households, who allocate a larger share of their income to food, are disproportionately affected and are struggling to cope with unexpected expenses, leading to increased difficulties in accessing proper nutrition. Simulations indicate that rising food prices contribute to higher poverty rates and greater income inequality, especially among vulnerable populations. They also suggest that the main poverty-targeted social assistance schemes offer critical support for the extreme poor, but expanding both coverage and benefits is vital to shield all at-risk individuals. Targeted policies that balance immediate relief with long-term resilience-building are essential to addressing the challenges posed by escalating food prices.Publication Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs(Washington, DC: World Bank, 2025-04-03)This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Career Placement of Skilled Migrants in the U.S. Labor Market : A Dynamic Approach(2009-04-01)The initial occupational placements of male immigrants in the U.S. labor market vary significantly by country of origin even when education and other factors are taken into account. Does the heterogeneity persist over time? Using data from the 1980, 1990, and 2000 U.S. Censuses, this study finds that the performance of migrants from countries with lower initial occupational placement levels improves at a higher rate compared with that of migrants originating from countries with higher initial levels. Nevertheless, the magnitude of convergence suggests full catch-up is unlikely. Country specific attributes are found to have less direct impact on the rate of assimilation than on the initial performance.Publication Jordan - Resolving Jordan's Labor Market Paradox of Concurrent Economic Growth and High Unemployment(Washington, DC, 2008-12-23)Reducing unemployment is a top priority of the Government of Jordan, as expressed in its principal strategies, "we are all Jordan" and the national agenda. Consistent with those strategies and with the recommendations of donors, the Government's approach to reducing unemployment has been to create jobs by attracting investments that promote gross domestic product (GDP) growth. In recent years, Jordan has successfully attracted investment, achieved strong GDP growth, and created many new jobs. This report also recommends actions to further the Government's goal of reducing employment. To accomplish this we cover industrial policy, fiscal policy, regional development, education, and social protection programs. Although this report comments on employment aspects of several policies and programs, truly comprehensive analysis of these policies and programs is beyond its scope. Rather, these findings and recommendations should be considered in the context of ongoing work by the Government, the World Bank, and other donors the various policy and program areas. That work includes analytical work and investments in the areas of: (a) public expenditure, (b) financial sector functioning, (c) investment climate, (d) poverty mapping, and (e) pension reform. It also includes projects in: (a) higher education development, (b) education reform for the knowledge economy, (c) social protection, (d) employer-driven skills development, and (e) regional and local development.Publication Making Work Pay in Nicaragua : Employment, Growth, and Poverty Reduction(Washington, DC : World Bank, 2008)The objective of this report is to provide some policy guidelines for the fight against poverty. In particular, it hopes to be able to identify the growing sectors, as well as the constraints faced by the poor in benefiting from this growth. The report is part of a series of studies conducted within the Poverty Reduction Group (PRMPR) to foster understanding of the role of employment earnings and labor markets in shared growth. In addition, it is intended to function as a background document for the World Bank's Nicaragua Poverty Assessment 2007. The degree to which growth is able to translate into poverty reduction depends on how its benefits are distributed among different segments of society. There is little doubt that growth measured by changes in average income contributes significantly to poverty reduction. However, it is also clear that countries differ in the degree to which income growth spells have translated into poverty reduction. Although differences in the responsiveness of poverty to income growth account for a small fraction of the overall differences in poverty changes across countries, from the point of view of an individual country, these differences may have significant implications for poverty reduction, especially in the short term.Publication The Great Migration : Urban Aspirations(World Bank, Washington, DC, 2013-11)The great 21st-century migration into cities will present both a great challenge for humanity and a significant opportunity for global economic growth. This paper describes the diverse patterns that define this metropolitan migration. It then lays out a framework for understanding the costs and benefits of new arrivals through migration's externalities and the challenges and policy tradeoffs that confront city stakeholders. The paper concludes by suggesting ways municipalities, by optimizing flexibility, can make migration more productive and less destructive in shaping the 'good city' and the 'smart city.' There are few paths to global economic growth that do not run through cities, and even fewer that do not depend on growing the city in population size, scale, and economic exchange. Historically, cities have grown by concentrating the economic advantages of number and density, the social potential of innovation, and the cultural possibilities of newness. By bringing together the factors of production, land, labor, capital, and enterprise, in ever more recombinant forms, cities offer the possibility of securing new economic advantages and scaling them up.Publication The Great Migration : Urban Aspirations(World Bank, Washington, DC, 2014-05)The great 21st-century migration into cities will present both a great challenge for humanity and a significant opportunity for global economic growth. This paper describes the diverse patterns that define this metropolitan migration. It then lays out a framework for understanding the costs and benefits of new arrivals through migration's externalities and the challenges and policy tradeoffs that confront city stakeholders. The paper concludes by suggesting ways municipalities, by optimizing flexibility, can make migration more productive and less destructive in shaping the 'good city' and the 'smart city.' There are few paths to global economic growth that do not run through cities, and even fewer that do not depend on growing the city in population size, scale, and economic exchange. Historically, cities have grown by concentrating the economic advantages of number and density, the social potential of innovation, and the cultural possibilities of newness. By bringing together the factors of production, land, labor, capital, and enterprise, in ever more recombinant forms, cities offer the possibility of securing new economic advantages and scaling them up.
Users also downloaded
Showing related downloaded files
Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.Publication Breaking the Conflict Trap : Civil War and Development Policy(Washington, DC: World Bank and Oxford University Press, 2003)Most wars are now civil wars. Even though international wars attract enormous global attention, they have become infrequent and brief. Civil wars usually attract less attention, but they have become increasingly common and typically go on for years. This report argues that civil war is now an important issue for development. War retards development, but conversely, development retards war. This double causation gives rise to virtuous and vicious circles. Where development succeeds, countries become progressively safer from violent conflict, making subsequent development easier. Where development fails, countries are at high risk of becoming caught in a conflict trap in which war wrecks the economy and increases the risk of further war. The global incidence of civil war is high because the international community has done little to avert it. Inertia is rooted in two beliefs: that we can safely 'let them fight it out among themselves' and that 'nothing can be done' because civil war is driven by ancestral ethnic and religious hatreds. The purpose of this report is to challenge these beliefs.Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.